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Currency Market Analysis

May 24, 2021 | Currency Market Analysis

Global Themes

It may be a holiday for Canada but it’s not for the U.S. dollar which remained anchored near four-month lows. The weaker dollar kept near recent three- and four-month lows against sterling and the euro, and its lowest in six years against the Canadian dollar. Wall Street futures signaled a positive start to the week which supported riskier currencies at the dollar’s expense. Expectations of strengthening global growth have weighed on safe havens like the greenback and boosted currencies from Europe and Canada. Currencies this week will look for direction from revised first quarter growth from the U.S. and Germany, two of the world’s four biggest economies. The struggling greenback could see more two-way volatility, particularly if fresh U.S. inflation figures on Friday print on the hot side of expectations. Canadian markets are closed today for Victoria Day. 


The euro rose towards recent four-month highs, boosted by the weaker dollar and optimism about a synchronized global recovery gaining momentum. Germany’s Ifo survey of business confidence on Tuesday is expected to add to global optimism with forecasts calling for improvement to 98.1 in May from April whose print of 96.8 was the highest since mid-2019. 


The UK pound steadied as it consolidated a three-week winning streak against the greenback that pushed it to three-month highs. A dearth of UK economic events this week could see the pound take its cues from underlying risk sentiment and global stock movements. Britain issues a survey of consumer spending Tuesday that’s forecast to strengthen for a second straight month in May.


The loonie was generally muted in holiday trade with local markets closed for Victoria Day. As a result, the loonie hovered within striking distance of recent six-year peaks against the dollar. Headlining a fairly quiet week for Canada’s economy is a report Thursday on average weekly earnings. Canada’s dollar got a boost last week higher than expected inflation and above forecast consumer spending, the latest evidence of the recovery gaining steam.

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